Can someone please help me with the following question:
a) I need help calculating Ashton's Art Emporium Inc.'s income tax expense for 2018, showing the current and deferred portions.
b) How do I reconcile Ashton's Art Emporium Inc.'s accounting income at the income tax rate with its income tax expense for 2018?
c) What balances, related to income taxes, will appear on the statement of financial position of Ashton's Art Emporium Inc. as at December 31, 2018?
i) If the company reports in compliance with IFRS, what would be the current & non-current balance?
ii) If the company reports in ASPE and uses the accrual method of accounting for income taxes, what would the current & non-current balances be?
The following information is provided:
Ashton's Art Emporium Inc. provided the following calculation of taxable income for its 2018 fiscal year:
accounting income before income taxes $248,000
Non-taxable dividends from Canadian corporation (16,000)
Excess of Capital Cost Allowance over depreciation expense (84,000)
Warranty payments in excess of warranty expenses recorded (12,000)
Non-deductible expenses 18,000
50% of meals and entertainment expenses 10,000
Taxable income $164,000
In 2017, the company reported a non-capital loss of $100,000 and carried $50,000 back, resulting in a recovery of $16,000. The balance of the tax loss benefit was considered to be realizable and a deferred tax asset of $16,000 was set up at the end of that year. The only other deferred income tax balances at the end of 2017 were a $6,400 deferred asset balance relating to the warranty provision of $20,000 at December 31, 2017, and a deferred income tax liability of $48,000 relating to the difference between the net book value of the company's capital assets of $508,000 and its Undepreciated Capital Cost for income tax amounting to $358,000.
Amortization expense for 2018 amounted to $50,000 and Capital Cost Allowance claimed was $134,000.
The income tax rate for 2018 of 32% was known when the 2017 financial statements were prepared. The enacted rate for 2019 is known to be 35%.
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